Proposed Senate Bill to Reduce Drug Expenses for Medicare Beneficiaries
A newly proposed Senate bill aims to reduce prescription drug expenses for millions of Medicare beneficiaries by altering how Medicare Part D plans include generic and biosimilar drugs. The bipartisan legislation, introduced by Senators James Lankford and Maggie Hassan, seeks to mandate that Medicare Part D plans cover lower-cost generics when they are more affordable than branded medications.
Michael Ryan, a finance expert, highlighted that current pricing practices often lead to higher costs for generics due to pharmacy benefit manager (PBM) rebates. The bill aims to rectify this by placing cheaper drugs on lower tiers. This move addresses a significant barrier in regulatory compliance, ensuring that cost-effective medications are accessible to Medicare beneficiaries.
The bill, titled the Ensuring Access to Lower-Cost Medicines for Seniors Act, proposes amendments to the Social Security Act impacting both Medicare Part D and Medicare Advantage plans with drug coverage. Starting in 2028, formularies must include generic drugs whenever they are less expensive than branded equivalents. Additionally, at least one lower-cost biosimilar would be required when a cheaper option exists for a covered biologic.
Impact on Out-of-Pocket Expenses
Senator Lankford stated the bill aims to remove pricing obstacles that hinder savings from reaching patients, ensuring that generics and biosimilars provide the expected cost benefits. This legislation could lead to reduced copayments and coinsurance for participants, potentially saving beneficiaries hundreds of dollars annually. Part D plans often involve coinsurance, which is a percentage of a drug's list price; thus, the financial impact could be substantial.
According to Kevin Thompson, CEO of 9i Capital Group, focusing on lower-cost generics could help decrease overall drug prices over time, benefiting retirees financially. However, while the legislation is bipartisan, it currently only has two sponsors and has been referred to the Senate Finance Committee. Standalone drug-pricing bills typically face challenges unless attached to larger healthcare legislation, which could impact the bill's momentum in Congress.
If approved, the changes would take effect in 2028, allowing insurers and the Centers for Medicare & Medicaid Services time to adjust formularies and cost-sharing models accordingly. Alex Beene, a financial literacy instructor, noted the potential for cost savings for seniors and the Medicare system, highlighting the significance of such reform during an election year.